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Managerial Accounting and the Business Environment

Chapter 1

McGraw-Hill/Irwin

Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Customer Value Propositions


Customer Intimacy Strategy Understand and respond to individual customer needs.

Operational Excellence Strategy

Deliver products and services faster, more conveniently, and at lower prices.

Product Leadership Strategy

Offer higher quality products.

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Organizational Structure
Decentralization is the delegation of decisiondecisionmaking authority throughout an organization.

Corporate Organization Chart


Board of Directors President Purchasing Personnel Vice President Operations Chief Financial Officer Controller
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Treasurer

Process Management A business process is a series of steps that are followed in order to carry out some task in a business.
Product Design Customer Manufacturing Marketing Distribution Service

R&D

Business functions making up the value chain


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Traditional Push Manufacturing Company Traditional push manufacturing Raw materials Large inventories Work in process Finished goods

Materials waiting Completed products to be processed. awaiting sale. Partially completed products requiring more work before they are ready for sale.
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Lean Production
Identify value in specific products/services. Identify the business process that delivers value.

The lean thinking model is a five step approach.

Organize work arrangements around the flow of the business process.

Continuously pursue perfection in the business process.

Create a pull system that responds to customer orders.


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Lean Production
The five step process results in a pull manufacturing system that reduces inventories, decreases defects, reduces wasted effort, and shortens customer response times.

Customer places an order

Create Production Order

Generate component requirements

Goods delivered when needed

Production begins as parts arrive

Components are ordered


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Theory of Constraints
A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The Theory of Constraints is based on the observation that effectively managing the constraint is the key to success.

The constraint in a system is determined by the step that has the smallest capacity.

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Theory of Constraints
Only actions that strengthen the weakest link in the chain improve the process.

2. Allow the weakest link to set the tempo.

1. Identify the weakest link.

3. Focus on improving the weakest link. 4. Recognize that the weakest link is no longer so.
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Six Sigma
A process improvement method relying on customer feedback and fact-based data gathering and analysis techniques to drive process improvement. Refers to a process that generates no more than 3.4 defects per million opportunities. Sometimes associated with the term zero defects.

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Six Sigma
Stage Define The Six Sigma DMAIC Framework Goals Establish the scope and purpose of the project. Diagram the flow of the current process. Establish the customer's requirements for the process. Gather baseline performance data related to the existing process. Narrow the scope of the project to the most important problems. Identify the root cause(s) of the problems identified in the Measure stage. Develop, evaluate, and implement solutions to the problems. Ensure that problems remain fixed. Seek to improve the new methods over time.
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Measure Analyze Improve Control

IMA Guidelines for Ethical Behavior


Recognize and communicate professional limitations that preclude responsible judgment.

Maintain professional competence.

Competence
Provide accurate, clear, concise, and timely decision support information.

Follow applicable laws, regulations and standards.

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IMA Guidelines for Ethical Behavior


Do not disclose confidential information unless legally obligated to do so. Do not use confidential information for unethical or illegal advantage.

Confidentiality

Ensure that subordinates do not disclose confidential information.


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IMA Guidelines for Ethical Behavior


Mitigate conflicts of interest and advise others of potential conflicts. Refrain from conduct that would prejudice carrying out duties ethically.

Integrity
Abstain from activities that might discredit the profession.
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IMA Guidelines for Ethical Behavior


Communicate information fairly and objectively. Disclose delays or deficiencies in information timeliness, processing, or internal controls.

Credibility

Disclose all relevant information that could influence a users understanding of reports and recommendations.
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Corporate Governance
The system by which a company is directed and controlled.

Board of Directors

Incentives and monitoring for

Top Management

To pursue objectives of

Stockholders
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Enterprise Risk Management


Should I try to avoid the risk, share the risk, accept the risk, or reduce the risk?

A process used by a company to proactively identify and manage risk.

Once a company identifies its risks, perhaps the most common risk management tactic is to reduce risks by implementing specific controls.
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Corporate Social Responsibility


Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.

Customers

Employees

Suppliers

Communities Stockholders

Environmental & Human Rights Advocates

CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.
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End of Chapter 1

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